Consolidated Water Co. Ltd.

Good morning. Thank you for joining us today to discuss Consolidated Water Co.'s second quarter 2022 results. Hosting the call today is Chief Executive Officer of Consolidated Water Co., Rick McTaggart, and the company's Chief Financial Officer, David Sasnett. Following their remarks, we'll open the call for your questions. At any time during the call, you may join the Q&A queue. by pressing the star 1 on your keypad. Before the call concludes today, I'll provide some important cautions regarding the forward-looking statements made by management during the call. I'd like to remind everyone today's call is being recorded and it will be made available for telecom replay per the instructions in yesterday's press release, which is available in the investor relations section of the company's website. Now I'd like to turn the call over to Consolidated Water Co. CEO Rick McTaggart. Sir, please go ahead.

Thank you, Nick, and good morning, everyone. Thanks for joining us today. As noted in our earnings release issued yesterday afternoon, we reported dramatically improved results for the second quarter of 2022 compared to last year. Our total revenue for the quarter increased by 26%. to $21.1 million. This contributed to the increase in our net income from continuing operations to $2.7 million or 18 cents per share. Our retail segment revenue grew by 15% to $6.5 million. And this increase resulted from the significant easing of travel restrictions to the Cayman Islands for tourists and the reopening of large hotels and other vacation properties on the island earlier this year. And this drove increased water consumption by tourism industry related businesses. Our bulk segment revenue increased by 1.7 million to 8.4 million and contributed operating income of 2.4 million. Our services segment revenue increased by 1.3 million to $5.1 million, with this contributing operating income of $356,000. We are very encouraged by the trends that drove these results. Our manufacturing segment, however, continues to struggle with supply chain issues and the currently weak economic environment. We are optimistic that this segment will report improved results in the latter half of this year, based on our current contracted backlog. Also during the quarter, we announced two major contract wins. In May, pursuant to a competitive bid process, we were awarded a contract by the Water Authority of the Cayman Islands to design and build a new 2.64 million gallon per day seawater desalination plant on Grand Cayman. Following the construction and sale of this plant to Water Authority, we will operate the plant and deliver the water produced to the Water Authority for 10 years. This contract is expected to generate more than $20 million in revenue over the life of the contract, with the majority of the revenue being recognized on the construction and sale of the plant, which the plant is scheduled to be completed in the fourth quarter of 2023. We commenced the permitting and design phase for this project during this past quarter, so things are moving along. In May, also in May, our majority owned subsidiary Perk Water Corporation signed a contract with Liberty Utilities to construct and commission a 4 million gallon per day wastewater treatment facility in Goodyear, Arizona. The construction and commissioning revenue under this contract is expected to total approximately $82 million with the facility expected to be operational by December 2023 and fully completed by the end of the second quarter of 2024. Construction of this important project is already underway and we will begin to generate significant revenue beginning next quarter. Now, before I talk about our progress further, and our outlook for the rest of the year. I'd like to turn the call over to David Sasnett, our CFO, who will take us through the financial details for the quarter.

Thanks, Rick, and good morning, everyone. Thanks for joining us today. Yesterday, we issued our earnings release for the second quarter of 2022, which is available in the investor section of our website. We reported that revenue Total $21.1 million in the second quarter, which is an increase of 26% from the second quarter of 2021. This growth reflects increases of $852,000 in our retail segment revenue, $1.7 million in our bulk segment revenue, $1.3 million for our services segment, and $510,000 in additional manufacturing segment revenue. As Rick mentioned, the increase in our retail revenue was due to the improvement in tourist activity in the Cayman Islands last quarter. This generated an 8% increase in the volume of water sold by our Cayman Water subsidiary. Our retail revenue also increased as a result of higher energy costs that increased the energy pass-through component of our water rates, as well as a more favorable rate mix. Much of the increase in volume sales was to Tourist Related Properties, and they pay a higher per gallon rate than our residential customers. The increase in bulk segment revenue is primarily attributable to an increase in energy costs for CW Bahamas, and these energy costs increased the energy pass-through component of CW Bahamas rates. The increase in our service to segment revenue is attributable to increases in both plant design and construction revenue, as well as operating and maintenance revenue increase. I want to make it clear and point out to investors that our services segment revenue does not reflect any revenue from the two contracts we recently won, both on Grand Cayman and in Arizona. And investors should expect to see revenue from those two contracts begin to increase our services segment revenue next quarter. Gross profit for the second quarter of 2022 was $7.5 million, or Approximately 36% of revenues. This compares to $6.1 million in gross profit in the same quarter of last year, which was also about 36% of revenues. Our net income from continuing operations attributable to consolidated water stockholders for the second quarter was $2.7 million or $0.18 per basic and diluted share. This compares to a net loss of $1.5 million or $0.10 per share for the second quarter of last year. Net income attributable to consolidated water stockholders for the period, which includes the results of our discontinued operations, was $2.3 million or $0.15 per share. In comparison, we reported a net loss of $1.7 million or $0.11 per share in the second quarter of last year. Now turning to our balance sheet, as we have previously disclosed, the liquidity of our Bahamas subsidiary has been adversely affected in prior months really for an extended period of time by delinquent accounts receivables due from its sole customer, the Water and Sewage Corporation of the Bahamas. In February of this year, we received a payment schedule from the Bahamas government, according to which the government plans to reduce our CW Bahamas delinquent accounts receivables over the course of 2022 with the intention of eventually bringing all of CW Bahamas receivables from the Water and Sewage Corporation to current status. Under this plan, during the second quarter of this year, CW Bahamas received approximately $16.4 million in payments towards its accounts receivable from the Water and Sewage Corporation of the Bahamas. These payments reduced CW Bahamas accounts receivables to $13.5 million as of June 30th of this year. We are pleased to report this dramatic improvement in our liquidity, and we greatly appreciate the Bahamas government's commitment to paying down these receivables well ahead of the dates they provided in their February payment schedule. We are especially appreciative with their ability to do this given the adverse economic impact the pandemic has had on the Bahamas economy. As of June 30th this year, our cash and cash equivalents totaled $49.1 million. Our working capital was $71.6 million. Our debt was less than $300,000. and our stockholders' equity totaled $159.4 million. Our projected liquidity requirements as of June 30th for the balance of this year include capital expenditures for existing operations and plant construction for approximately $10.1 million. This $10.1 million includes $3.3 million to be incurred for the replacement of our West Bay seawater desalination plant on Grand Cayman and approximately $3.5 million for the construction of the Water Authority's new desalination plant under our recently awarded contract. In addition, about $1.3 million in dividends were paid in July of 2022, and based upon our dividend history, we anticipate similar dividend payments in the fourth quarter this year. This completes our financial summary for the quarter, and I'd like to turn the call back over to Rick.